1 Thursday, 7 September 2017 24 MR LAKE: My Lord, the next witness that I would like to 25 call is Iain Whyte. 43 1 MR IAIN WHYTE (sworn) 2 Examination by MR LAKE 3 CHAIR OF THE INQUIRY: Could I ask you, Mr Whyte, as with 4 other witnesses, to listen to the question and to simply 5 answer it as concisely as possible. 6 MR LAKE: Mr Whyte, could you state your full name, please. 7 A. My name is Iain Whyte. 8 Q. The Inquiry has your address details already, but by way 9 of background, you have been a councillor in the City of 10 Edinburgh Council from 1995, I think, until the present 11 day? 12 A. Yes. 13 Q. You were the Leader of the Conservative Group in the 14 period from 2002 to 2010? 15 A. That's correct. 16 Q. Could I ask you to look at a document. You should have 17 it in paper copy in front of you, but I'll also have it 18 put on screen. It's reference TRI00000125. 19 Do we see both the electronic version and the paper 20 version; it is a copy of the witness statement that you 21 have provided to this Inquiry? 22 A. Yes. 23 Q. On the paper version you should see you will have signed 24 the last page? 25 A. I should have. I did sign one. Yes. 44 1 Q. Can we take it that this is your evidence given to the 2 Inquiry? 3 A. Yes. 4 Q. I would like to ask you a few additional questions in 5 relation to certain matters arising out of it. With 6 that statement, could we firstly look at page 4. This 7 is under the heading "Initial Proposals" and your answer 8 to question 8. It's just a matter of some 9 clarification. 10 The question is -- concerns responsibility for the 11 decision to create TIE in 2002. You note in your answer 12 that you believe the Council ultimately decided to 13 create TIE, but it came as a firm recommendation from 14 the Council Chief Executive, Michael Howell, and his 15 team at TIE and specifically the City Development team. 16 I can understand the recommendation from the 17 Chief Executive and the City Development team. I think 18 Michael Howell was the Chairman of TIE ultimately when 19 it was formed? 20 A. Yes. 21 Q. I was puzzled by how it was that Michael Howell and the 22 team at TIE were responsible for the creation of TIE? 23 A. I may have had some misrecollection at the time I gave 24 the statement. And I haven't corrected that. 25 What I can't remember was exactly when 45 1 Michael Howell and those people came on board. I think 2 there were some external people helping Andrew Holmes 3 and his team around that time and were giving advice. 4 So that may have been what I was referring to. But 5 I don't have documents from that period with which to 6 check any of it. 7 Q. Is it your understanding that when TIE were established, 8 it was not specifically for the tram project, but with 9 a view to implementing the transport initiative 10 throughout Edinburgh? 11 A. Yes, it was. Although ultimately, as various aspects of 12 those proposals dropped away, TIE remains solely based 13 around trams. 14 Q. Indeed. Could we look at the next page of your 15 statement, please. I just want to look at the reasons 16 for establishing TIE. 17 If you could highlight the upper half of the page, 18 the first three paragraphs there should be legible if 19 you highlight it. 20 Just dealing with the second paragraph there, you 21 note: 22 "There was a team in the Council who managed the 23 roads and other transport infrastructure, but they were 24 of a certain size and were already working full time. 25 There is a need to bring in additional people and it was 46 1 seen that the best way of doing this was to bring them 2 into this special purpose vehicle. They were not to be 3 permanent Council employees and you could go outwith 4 local government terms and conditions. For instance, if 5 you needed an engineer at a set salary that was outwith 6 the Council's salary bands, you could buy that expertise 7 in if you were doing it through an arm's length 8 company." 9 A. Yes. 10 Q. There are two different things there. One is the 11 different salary structure. I think that's plain 12 enough. It frees you from the constraints of the 13 Council's salary terms? 14 A. Yes, and often expert engineers for projects like this 15 may be paid considerably more than a Council engineer 16 working on roads would be paid. So it allowed you to 17 pay more to get the correct expertise. That was one of 18 the main reasons. But there were also reasons, I think 19 I said in the paragraph later, around the structure of 20 bringing people in. People with the right expertise to 21 do the work, but also people as directors of TIE, 22 independent to bring expert advice to councillors on 23 that board. 24 So there were two aspects around the expertise being 25 brought in. 47 1 Q. Was there any reason why that particular expertise, 2 leaving aside the salary structure, could not have been 3 engaged by the Council, for example, on a consultancy 4 basis? 5 A. My recollection was that the advice we were given, and 6 it seemed reasonable advice to me at the time, was that 7 consultancy, for a lengthy period, would be very 8 expensive. It was best to have people brought in 9 specifically for the project, or on TIE, and when TIE 10 was first set up, as you have indicated, there were 11 potentially more projects to do or there was an 12 expectation that the work would be ongoing for a longer 13 period. 14 So it didn't seem consultancy was the right way of 15 doing it at that time, but this would allow the Council 16 to buy in that expertise and almost ring-fence it away 17 from other Council officers and if something went wrong 18 and you had to wind it up, you could without having the 19 worry of people on the Council payroll as well. 20 Q. If we look at the final paragraph that we have on the 21 screen at the moment, you go on to a further reason, 22 where you say: 23 "It was also a bit about project oversight." 24 This is the creation of TIE: 25 "Part of having a strong TIE team meant that there 48 1 would be councillor and officer representation on an 2 independent board of directors. So both shareholder and 3 stakeholder representation, but also allowing them to 4 bring in independent non-executives to oversee any work 5 that the company was doing and question from an expert 6 point of view." 7 Now, I take it from the second sentence there, you 8 are talking about the bringing in of councillor and 9 officer representation would be what makes the TIE team 10 strong. 11 A. So the TIE officer team would bring appropriate expert 12 and professional expertise to undertake the project 13 work. 14 The aim of creating the TIE Board to oversee that 15 work was to bring together a host of different things. 16 So you would have councillor and Council officer 17 representation on that board to bring oversight from the 18 Council and from a public point of view, and to 19 undertake general governance and assurance work. That 20 would be bolstered by bringing in further independent 21 directors who had expertise from the transport industry 22 or from finance or from law as appropriate, and who 23 could question and bring non-executive governance to the 24 work that the TIE team was doing in a way that you might 25 not have -- you would have some of that from Council 49 1 officers who had some experience in these areas, but 2 maybe not of a project directly of that type, and you 3 wouldn't necessarily have it in councillors because 4 we're elected from the public, and so you could bring in 5 additional expert non-executive governance through that 6 structure. 7 Q. Do you consider that this idea of bringing in expert 8 non-executive directors was something that was 9 successfully carried out in relation to TIE? 10 A. With hindsight, no, because as the project developed, 11 I've come to the belief that the TIE Board and the 12 Council officers who were part of that and were 13 reporting back to the Council didn't bring strong enough 14 governance and oversight to the work that the team were 15 doing. 16 But it's difficult for me to pinpoint exactly how or 17 where that came into play, because obviously I wasn't on 18 the TIE Board and I was hearing about it arm's length 19 from colleagues who were. 20 Q. You said in your answer there that the Council officers 21 on the board did not bring strong enough governance. 22 A. Well, I fully expected, and indeed, when we set up TIE, 23 and then when TIE was given responsibility for trams and 24 there were discussions about how the project would be 25 managed and the contract work would be managed, 50 1 I personally had discussions with Tom Aitchison, the 2 Council Chief Executive, about how we as a Council would 3 be assured that TIE was doing the job on our behalf, was 4 looking after public money, and was aiming to complete 5 the project as efficiently as possible. 6 I was given assurance that the reporting line was 7 such that those who were on the board as Council 8 directors would still have a reporting line to the 9 Council, that there was put in place a tram monitoring 10 officer who would oversee all of the work that TIE was 11 doing and report back to the Council and that the 12 Chief Executive himself would be responsible for 13 ensuring shareholder value effectively. 14 Q. You said you were given an assurance on these matters. 15 Can you remember who gave you that assurance? 16 A. It would be in briefings with Tom Aitchison, 17 Chief Executive. But it was backed up in further 18 discussions with other officers. So people like 19 Andrew Holmes and Donald McGougan. 20 Q. In terms of this reporting line to the Council, was that 21 to be purely the Council officers who might be sitting 22 on the company board or the councillors also? 23 A. Well, there were also councillors. I expected them 24 to -- while having a duty to the company, to also bring 25 some public oversight in the role that they undertook. 51 1 Q. Just before I turn to the question of the councillors on 2 the board, you referred to the Tram Monitoring Officer? 3 A. Yes. 4 Q. That was, I think, a Council official; was that correct? 5 A. That was a Council official. 6 Q. Charged with some oversight of the project generally? 7 A. The project generally and of TIE, and of reporting back 8 to the Council's Transport Committee, and I think there 9 was also something called the Tram Working Group which 10 was to allow meetings to be held privately away from -- 11 in a fully constituted group, but away from transport 12 committee because there may be commercially confidential 13 matters that had to be discussed, although my 14 understanding is that that group very rarely met. 15 Q. We may come back to issues of confidentiality in 16 a little while. 17 I want to look at the position of the councillors 18 who were on the board. 19 You referred here on page 5 to the question of them 20 providing some oversight function. I think it's fair to 21 say you also regarded that they might provide some 22 control over the company activities; is that correct? 23 A. I would have expected them to. 24 Q. In fact, the reference to that, I couldn't find it 25 momentarily, is if you look at the next page. It's the 52 1 paragraph there beginning "CEC exercised"? 2 A. Yes. 3 Q. "CEC exercised control over TIE by putting people on the 4 board, but there was also a reporting relationship to 5 our senior officers, to the Chief Executive, and 6 somebody from City Development." 7 Can you explain how it is you consider that putting 8 councillors as directors on the board provides the 9 Council with control over the activities of the company? 10 A. Well, there were a number of ways that you could 11 exercise control over the company. Ultimately, that 12 control rested with officers reporting to us as Council, 13 to our Transport Committee or to the Council itself. 14 That was as shareholder and as sole shareholder, the 15 Council could direct the company. 16 Q. Just pause there. You're talking about officers 17 reporting to councillors. Is this -- 18 A. Yes. 19 Q. -- officers who would be on the board, or just Council 20 officers generally would make enquiries, get the 21 information and brief the councillors appropriately? 22 A. So there were two ways -- I suspect we have a slightly 23 different way of thinking about Council companies now 24 and the whole situation has evolved since back then and 25 we're probably talking about 2006/2007. 53 1 I was concerned, particularly in the period up to 2 2007, about how -- so I did expect that councillors on 3 the board would, while maintaining the interests of the 4 company, would retain the thoughts of the shareholder 5 that they wished to appropriately procure the tram 6 project and other projects, and in the public interest. 7 And that was why the company was set up and that was the 8 purpose of the company. 9 So I expected them to have oversight in that sense, 10 and push for those objectives. 11 In terms of reporting to the Council, I was 12 concerned that we, as the Conservative Group, as an 13 opposition, were frozen out of the process at that 14 point. We had opposed the road tolls, the congestion 15 charging, and because of that there were political 16 decisions made to prevent us having a member on 17 transport boards like this, or any other direct input, 18 until the administration changed in 2007. 19 So we didn't have anyone with direct knowledge. 20 So I was pushing the officers, through private 21 briefings and questions I had with them, to say, well, 22 if something is happening in one of these companies or 23 boards, how do we as the Council know about it? 24 That was where my understanding of the fact that 25 officers, and specifically the Chief Executive who 54 1 wasn't on the board, things would be reported to him and 2 he would report them back to Council, were there any 3 issues. 4 Q. Reported by whom? 5 A. Well, once the Tram Monitoring Officer was in place, it 6 was their job to oversee and then let the 7 Chief Executive know if there was anything that should 8 be reported. But ultimately, with the line of command, 9 the line of management, direction, ultimately it's the 10 Chief Executive's job to report to the Council. 11 Q. Chief Executive of the Council? 12 A. Of the Council. 13 Q. What you're describing there is the councillors would be 14 kept informed as a result of the activities of Council 15 officers working as Council officers? 16 A. Yes. 17 Q. In the sense you would have the Tram Monitoring Officer, 18 the Chief Executive, and possibly other Council 19 officers, and it's their job to enquire and inform 20 councillors? 21 A. Yes. 22 Q. Now, none of that that you just described involves 23 putting anyone on the boards of these companies? 24 A. No. So that was all supplemented by having people on 25 the board of these companies, and then there was also -- 55 1 so by having people on the board of these companies, 2 there was then a more informal relationship between the 3 work of the board and the work of councillors and the 4 work of senior officials -- senior Council officials who 5 were on the board to tie in what they were doing on the 6 arm's length company with what the Council's objectives 7 were. 8 Q. That's something you mentioned a while ago, that the 9 councillors sitting as board members, company board 10 members, would push for the objectives of the Council? 11 A. That would be my expectation. 12 Q. But I think you also recognised in your evidence that 13 when a person -- a councillor sitting as a director, 14 they must act in the interests of the company. 15 A. Yes. 16 Q. So they end up with -- someone sitting in that position 17 in a sense has two masters? 18 A. Yes. 19 Q. The interests of the Council on the one hand, the 20 objectives of the Council on the one hand and the 21 company interests on the other; and that seems ripe for 22 creating conflict, would you agree? 23 A. It can create conflict, and I can think of at least one 24 occasion where I've been on the board of a company, 25 where in assessing risk, I took a rather different 56 1 assessment of the risk in what was proposed to me on the 2 company board, as opposed to when that then became 3 a formal report to the Council, asking for permission 4 from the Council as shareholder to undertake a project, 5 where the risk -- the assessment of risk would be 6 different if you were looking at it from a public 7 funding point of view, as opposed to funding within 8 a company. 9 Q. But is that conflict and the possibility of that 10 conflict not a very good reason why you would be better 11 using the first method of keeping councillors informed, 12 that is officers enquiring and reporting, would be more 13 satisfactory than trying to put someone into the company 14 to carry out Council objectives? 15 A. Yes, it would, and both were in place, as I understand 16 it. 17 Q. But the first one doesn't seem to attract the 18 difficulties of these conflicts, whereas the second 19 does? 20 A. Indeed, and I would say it would now be good practice, 21 although we don't have this across the Council, my group 22 on the Council have now instituted this, where if we put 23 a member on the company board, it is not a member who 24 will be on the parent committee in the Council 25 scrutinising the work of that company. So there is 57 1 a separation there to allow them to act independently, 2 and to allow our members to fully scrutinise what 3 companies are doing without a conflict. 4 Q. The other thing you refer to, apart from pushing for the 5 objectives of the Council, was a question of reporting; 6 that the councillors sitting as directors would provide 7 another reporting line. Did I understand that 8 correctly? 9 A. That was very much an informal reporting line. So post 10 2007 my Conservative colleague Allan Jackson was 11 a member of the TIE Board, and the effect of that was 12 that he brought perhaps a more direct line for me and 13 other group members to ask questions of TIE officials, 14 and although he was at times bound by confidentiality, 15 to get an informal broader sense of what was going on 16 with the project. 17 Q. I just want to understand how that informal line worked. 18 You said on the one hand he would provide a line for you 19 to get to speak to TIE officials. Was that essentially 20 effecting an introduction between you on the one hand 21 and TIE officials on the other? 22 A. Yes. 23 Q. And it would be up to the TIE officials to determine 24 what information they would give to you? 25 A. Yes. 58 1 Q. But in terms of one of the -- your colleague councillor 2 sitting on the board, he's essentially providing company 3 information to you, someone in his group, political 4 group? 5 A. In part. He was very careful about what he provided. 6 Q. Careful in what way? 7 A. Careful in the sense that he certainly didn't leak to me 8 any private meetings of boards, private papers from 9 board meetings or minutes or anything like that. 10 Q. Because once again that is sort of raising another 11 potential conflict, isn't it? 12 A. Yes. 13 Q. On the one hand your desire for information and his 14 desire to co-operate with you, with on the other hand 15 the need to respect company confidentiality. So another 16 area of conflict arises. 17 A. Potentially. 18 Q. But it does arise in practice, doesn't it? You said he 19 has to be careful about what he's saying? 20 A. Yes, yes. 21 Q. That will arise -- you've been candid about the position 22 within your group. It will arise with any political 23 group whose councillor is on the board of a company? 24 A. Yes, it would. 25 Q. You mentioned there had been consideration in recent 59 1 years of the role of councillors sitting on the board of 2 companies. I would like to look at a report to Council 3 in relation to that. 4 It will be shown on the screen to your right. It's 5 document reference CEC02086791. We can see from the 6 front page here that it is a report to the whole Council 7 for 13 December 2012, simply entitled "Council 8 companies"? 9 A. Yes. 10 Q. If you go to the next page, please, we can just see the 11 summary: 12 "This report sets out officer recommendations 13 following a review of Council companies and the 14 proposals of the capital coalition working group of 15 elected members set up to consider the recommendations." 16 Do you recognise this report? 17 A. I do, having re-read it prior to the Inquiry, yes. 18 Q. Could we look at the next page again, please. 19 Sorry, one further page. 20 If we look at paragraph -- 1.4 to the foot of the 21 page, it would be easiest. 22 1.4 is: 23 "With these risks and challenges in mind, the 24 Director of Corporate Governance recently carried out 25 a review of the existing Council companies and 60 1 consultation with officers and elected members has taken 2 place over a number of months." 3 If you look at paragraph 1.5, you can see the 4 officer recommendations. Can we look at 1.5 and the 5 subparagraphs beneath. We can see that the -- as part 6 of the consultation process, the Director of Corporate 7 Governance made a number of recommendations. They 8 include -- the first one is that: 9 "Elected members should not be directly involved in 10 operational decision-making of Council companies. Given 11 the potential for conflict of interest between their 12 roles as councillors and as directors (where there is 13 a statutory duty to act in the best interests of the 14 company and not the shareholder), it is recommended that 15 elected members do not act as directors on company 16 boards, but carry out a strategic direction setting, 17 oversight and challenge role as members of the relevant 18 Council committees." 19 Were you aware of that recommendation or have you 20 reminded yourself of that recommendation? 21 A. I have been reminded of it by reading the report, yes. 22 Q. If we go to the next page of the document, 23 paragraph 2.1.1, you can see that: 24 "Elected members have indicated their wish to 25 participate directly in decision-making as directors of 61 1 the Council companies. It is proposed that (save as set 2 on out in paragraph 2.2.3) three elected members will 3 sit on the board of each Council company; one member 4 from each of the capital coalition groups and one from 5 an opposition group. It is recognised that the members 6 appointed should have the appropriate skills and 7 experience to be involved in the running of the company 8 in question. It is proposed that one of the councillor 9 directors should act as chair of the company. Officers 10 will not sit on the board of any Council company but one 11 officer from the appropriate service area will attend 12 the board meetings as an observer." 13 Essentially, the councillors have rejected the 14 recommendation from the Director of Corporate 15 Governance? 16 A. Well, my understanding, and it tells you in the report 17 it was a capital coalition working group that rejected 18 that, the capital coalition was Labour and SNP 19 councillors. 20 Q. Thank you very much. That was what I was coming to. It 21 wasn't a working group that you were involved in? 22 A. It wasn't a group that I was part of at all, and by that 23 period I was no longer Conservative Group Leader and so 24 wouldn't have expected to have been as involved with 25 discussions with the Director of Corporate Governance as 62 1 perhaps Councillor Balfour, then Councillor Balfour, who 2 I believe you are seeing. 3 Q. He's this afternoon. With in mind, but nonetheless with 4 your understanding of the issues arising out of these 5 companies, would you -- are you -- which of the two 6 views do you prefer? The councillors' view here, or the 7 working group view on the one hand, or the director's 8 view on the other? 9 A. Well, in some ways the director's view has a simplicity 10 about it. But I can understand why some elected members 11 wanted to retain a direct involvement because they would 12 feel that they could ensure they had an understanding of 13 the workings of the companies and whether or not they 14 were working in line with what the Council wished. 15 There's also -- so there were two amendments 16 submitted to this report, one of which asked for more 17 stuff to be brought in-house. That was not from my 18 group. My group proposed an amendment which accepted 19 most of the report but suggested that some of the 20 company structures be simplified so that there were 21 fewer companies. And therefore perhaps less options for 22 conflict. 23 My biggest concern over the years is that sometimes 24 the Council has appointed members to companies without 25 perhaps checking the necessary experience or skills and 63 1 appointing the best members to the appropriate 2 companies. And I think more could have been done about 3 that. 4 As I say, we've now taken a decision as a group that 5 we would make sure that the member who is a director of 6 the company is not a member who will be on the committee 7 that the company's results are reported to and the 8 committee that would be scrutinising the work of that 9 company, and that way we feel we've resolved that 10 conflict. 11 But that is not something that all political groups 12 on the Council have done. 13 Q. But in talking about the question of whether or not 14 some -- a councillor appointed brings the skills to 15 bear, that really requires that a view be taken of why 16 the Council is there. If they're there to really assist 17 the company, they are going to need to have a special 18 set of skills, aren't they? 19 A. Yes, although they may bring general non-executive 20 governance skills, as opposed to specific skills. 21 Q. If they are there -- if I may put it crudely -- to keep 22 an eye on the company and to try to carry the Council's 23 objectives, that's not necessarily going to require the 24 same skills? 25 A. It would require some of the same skills, but perhaps 64 1 not all. 2 Q. My Lord, I was going to -- 3 A. I think there are different views on this within the 4 Council, I would say. 5 Q. My Lord, I was going to move on to another matter. 6 I don't know if -- 7 CHAIR OF THE INQUIRY: We are going to break, Mr Whyte, to 8 give the shorthand writers some respite. So we will 9 resume again about 11.20. 10 A. Thank you. 11 (10.58 am) 12 (A short break) 13 (11.17 am) 14 CHAIR OF THE INQUIRY: You're still under oath. 15 MR LAKE: Thank you. My Lord. 16 Mr Whyte, I want to ask you a few questions about 17 the role of the Council in setting the strategy that 18 made the decisions in relation to the project. 19 Do you consider that there was sufficient chance to 20 properly consider those issues when they were brought 21 before the councillors to consider them? 22 A. There was in a sense that there were full reports made 23 to the Council on the overall strategy, and there were 24 opportunities for briefings, for private briefings for 25 political groups, and a chance to question and review 65 1 all of the information. 2 The one thing I would say was that was perhaps 3 missing was more opportunity to take things to 4 a committee of the Council, rather than always have the 5 reports to Full Council. 6 I say that because Full Council tends to be a very 7 formal meeting, where people take positions on the issue 8 before them and on the report before them. Generally 9 a Council administration will move the recommendations 10 in the report, and if you want to challenge anything, 11 you have to move an amendment at that point, and so the 12 administration's decision will be taken in advance and 13 the public decision-making will be about a debate on the 14 merits of the case. 15 At a committee there is much more opportunity to go 16 into the detail of matters. You can question the 17 officers at length and in public, in front of members of 18 the public, the media and others, and you can then test 19 the information they are giving you in a public way. 20 You can also use that information to help formulate 21 anything that you might move at that point to try to 22 have the recommendations altered or improved, and so in 23 a sense much of that work on the tram case was done in 24 private, I would say, throughout briefings and so on, 25 and for some of the early strategy, as an opposition 66 1 member, I would say we were simply presented with the 2 case, rather than having the opportunity to look at 3 alternatives in any great detail. 4 Q. Can I just clarify your answer. When you say that the 5 matter was done in private, that's in relation to the 6 broad strategy issues? 7 A. Yes. It was about briefings. So if the matter was 8 coming to Full Council, then each political group would 9 have a group meeting prior to Full Council, and there 10 would usually, for something major like trams, be 11 an opportunity for officers to come and brief each group 12 and for group members to ask questions of officers, to 13 supplement the information they had in writing in 14 Council papers. 15 But I would expect, and I'm talking about the early 16 stages, so you asked me about 2002 to 2006/2007-ish 17 before, when we were -- we were in opposition 18 throughout, but we were entirely in opposition in that 19 we didn't have anyone on TIE at that point, and we were 20 seen as opposing some of the major transport proposals 21 being put forward by the administration. 22 At that stage we very much simply got briefing and 23 papers prior to the Full Council. So about a week or 24 two weeks before. 25 At a later stage, once some decisions had been 67 1 taken, but as strategy developed, there was perhaps more 2 opportunity for us, because of a different attitude from 3 the coalition administration between 2007 and 2012, that 4 we perhaps had more access to officers, I would say, to 5 have regular updates and briefings during that period. 6 Q. This raises a question of how you got your information 7 and you have referred a number of times to briefings. 8 And access to officers. Do you consider that your group 9 in opposition had the same access to officers as other 10 groups in the Council? 11 A. I cannot say for certain because I don't know what 12 access all the other groups had. But I don't believe we 13 had as good access to information and officers prior to 14 2007. We certainly seemed to get more access after 15 that. 16 I would think that, from knowledge of the way the 17 Council operates, I believe the administration, the 18 Labour administration up to 2007, had more access to 19 information and officers and early work on proposing 20 strategy than we did. 21 Q. In terms of the briefings you were getting, your group 22 was getting on the tram project, were these briefings 23 scheduled to take place routinely or was it when 24 requested by you or other members of your group? 25 A. So that varied depending on the timeline of the project. 68 1 In the run-up to major decisions, and I would say right 2 up to the decision in early 2008 to proceed, then those 3 briefings tended to be a formal briefing prior to 4 a decision-making point at Council. 5 At a -- there were some additional background 6 briefings. I think in my statement I've mentioned 7 a trip to Dublin to learn from their experience and some 8 interaction with TIE at the time that Willie Gallagher 9 was Chief Executive, and there were some briefings 10 there, and they were more informal and were pretty much 11 interested members of my group who had asked to learn 12 more about the project, and so we were then given some 13 information. 14 Then later, once we'd got past the contract sign-off 15 point -- there was a mixture of things going on. I was 16 regularly briefed in any case as a Group Leader by 17 Tom Aitchison who was the Chief Executive on matters 18 that were coming to Council, or matters of interest to 19 the Council, and so he would keep me up to date, as he 20 saw it, with anything he felt was a development as 21 matters progressed. 22 So that was on at least a monthly basis, based on 23 Full Council meetings, and be about a week before the 24 Full Council meeting. 25 But there were also -- initially, fairly regular, 69 1 but it dropped off as there was nothing much new to tell 2 us each time, to maybe quarterly or maybe a bit further 3 apart, reports on progress as to how things were going. 4 Q. You were given reports on various matters that were 5 going to arise at Council meetings; yes? 6 A. Sorry? 7 Q. You were given Council reports prior -- so you were 8 given reports by Council officers prior to meetings on 9 issues that were going to be raised? 10 A. Yes. 11 Q. How important were these briefings to supplement those 12 reports and to fill in gaps? 13 A. They were very important because they were not only 14 an opportunity to supplement gaps or ask questions about 15 aspects not contained in the report. They were 16 an opportunity to question the officers, to check the 17 validity of the information they were providing us with. 18 Q. In view of their importance -- this is the briefings -- 19 does it occur to you that it might be strange that each 20 political group got their own briefings, so they weren't 21 necessarily getting all precisely the same information? 22 A. This is why I said to you in an earlier answer that 23 I believed it would be helpful if matters had gone to 24 a Council committee, because that would allow everyone 25 to have a chance to question officers and look at the 70 1 information in a public way, where everyone was getting 2 the same information. 3 Q. But that would just be the committee members? 4 A. That would just be the committee members, but we in 5 general, as the Council, have -- we cannot all take 6 a full interest in every single matter coming before the 7 Council, and we have committees and we trust that those 8 who are on those committees undertake the role on behalf 9 of the Full Council, as it were. 10 It's delegated to the committee. 11 So -- 12 CHAIR OF THE INQUIRY: Can other councillors who are not 13 members of the committee, could they sit in on 14 a committee hearing if they were interested in 15 a particular matter? 16 A. Yes, they could certainly sit in attendance at 17 a committee hearing. They may be able to take part also 18 if the matter related directly to their ward. So they 19 could bring up ward interest issues in the discussion 20 with officers at the start of the committee process. 21 CHAIR OF THE INQUIRY: And committee minutes presumably are 22 kept of what was asked. 23 A. Yes, they are, although your Lordship may know that 24 they're not all -- always detailed minutes. They are 25 very much a synopsis of the decision that was taken, 71 1 a bit like the Full Council minutes you will have seen 2 through the information submitted to you. 3 CHAIR OF THE INQUIRY: And are Council committee minutes 4 accessible to councillors who are not members of the -- 5 A. Yes, they are, and they're actually -- I think going 6 back, certainly to 2007, possibly a bit longer, they're 7 all available on the Council website, unless they are 8 a private session, in which -- but even then a synopsis 9 of the decision will be put up on the website. 10 CHAIR OF THE INQUIRY: Thank you. 11 MR LAKE: There's two things arising out of what you said. 12 One thing was it might be a matter -- certain matters 13 would be better considered at committee, rather than the 14 whole Council. 15 A. Yes. 16 Q. However, in terms of the large strategic decisions or 17 policy decisions, such as the decision to go ahead with 18 the tram project, is that a matter you consider would be 19 at committee or would that -- 20 A. So sometimes, and I can speak with experience of what 21 has happened in the last week or so, where there was 22 a discussion about continuing the proposal to undertake 23 a project to complete the line to Newhaven, that matter 24 has just recently been to the Council's Transport and 25 Environment Committee, but the committee took a decision 72 1 to move forward that will still have to go to Full 2 Council to be ratified, because of the scale of the 3 decision and the expenditure involved. 4 So in the sense that I'm saying the matter could go 5 to committee, it would not preclude it then going on to 6 Full Council, but it would allow an opportunity for 7 members to ask questions in public around something. 8 Q. The other matter that arises is, we started this 9 discussion on the question I posed regarding the 10 briefings to each group might result in differential 11 information from group to group? 12 A. Yes. 13 Q. You will be aware that after the Mar Hall mediation, the 14 Council set up an All Party Oversight Group whereby all 15 the parties attended, and were given the same briefing 16 at the same time. 17 Is that not a means by which it would be possible to 18 ensure that information was adequately and evenly 19 shared? 20 A. Yes, although having attended that -- those meetings as 21 a substitute on occasion, there were times when I asked 22 for further information at those meetings, and had to 23 receive that individually outwith the meeting 24 thereafter, because the officers didn't have it to hand 25 or whatever. 73 1 So there is still a possibility of additional 2 information only coming to some members who are 3 interested. 4 In terms of -- there was that group. 5 In terms of earlier in the project, there was 6 supposed to be a Tram Working Group of the Transport 7 Committee that would take some oversight of matters 8 reported by the Tram Reporting Officer and by the 9 Chief Executive. 10 For reasons which were never absolutely clear to me, 11 that -- and I think lie in the politics of the Council, 12 and are perhaps a matter that might be taken up with the 13 then administration, that group didn't seem to meet very 14 often or ever have many discussions in public that could 15 be accessed. 16 Q. If I could ask you, please, to look at page 17 of your 17 statement. What I'll do is identify a passage here and 18 then perhaps another couple of passages later which bear 19 upon the same issue. Then I can ask you to elaborate on 20 them. 21 If we look in the upper half of the page, if you 22 enlarge the upper half of the page, if I read the whole 23 of that paragraph: 24 "This is a very broad generalisation, but it is how 25 I felt. I would characterise the Labour administration 74 1 as not caring too much about the cost, so I do not think 2 they were pressing it in the same way that we were. 3 I do not think they were worried about that as much as 4 we were, and politically it is not in their way to do 5 that. So it meant that while there was a majority in 6 the Council who were in favour of delivering the 7 project, there was probably a lack of leadership to say 8 this is how we should deliver it, and I think that led 9 to a reduction in pressure on the officers at that stage 10 to deliver it appropriately and to keep TIE under some 11 control and accountable to the Council." 12 We will just consider this in isolation first of 13 all. I'm interested in the lack of leadership that you 14 talk about there. 15 Do I understand that is a lack of leadership on the 16 part of the Council as a whole? 17 A. So what I was trying to characterise there was what I've 18 seen in political life is a difference in view by some 19 in the Labour administration up until 2007, who were 20 about delivery of things, and less worried about 21 ultimately the cost to the taxpayer than -- it was very 22 much, in all the debates we had in my group internally, 23 an issue of if we were going to support this, because we 24 saw -- I think we had some debates in the group, but 25 I think on the whole, most of us saw the benefit in 75 1 transport terms. But some were very wary about the 2 cost, and we didn't hear or see any of that debate from 3 other groups within the Council. Particularly not from 4 probably, I would say, Andrew Burns who was Transport 5 Convener and then later Labour Leader. 6 Q. I'm concerned particularly with what you say there about 7 there was probably a lack of leadership to say: this is 8 how we should deliver it. 9 A. Yes. 10 Q. What did you think the Council could or should have been 11 deciding or saying, determining? 12 A. Well, with hindsight, and it is with hindsight, I would 13 have -- I'm a more experienced member of boards and of 14 the Council than I was back then, but I would have hoped 15 we would have possibly been given more delivery options 16 than we were in terms of how you might structure the 17 contract, whether you might seek a design and build 18 contract, for instance, rather than the segmented 19 contracts that proved to be the case that we got, and -- 20 Q. So you would have liked to see the Council involved in 21 at that level of detail, rather than that being handled 22 over in its entirety to TIE? 23 A. I think we should have had a business case that assessed 24 various options and allowed us to make decisions around 25 that, based on the evidence available. 76 1 CHAIR OF THE INQUIRY: The passage that you referred to 2 starts off with being a very broad generalisation. So 3 it was referring to the previous comments, and if you 4 look at the previous page, which is 16, that seems to be 5 dealing with this situation after the SLD and SNP 6 coalition came in? 7 A. Yes. 8 CHAIR OF THE INQUIRY: And you are pretty critical of that. 9 That's the context of that comment. You are saying that 10 both you and the Labour administration were concerned 11 about it, but on one hand, the Labour administration 12 weren't that bothered about cost? 13 A. They are more concerned about delivery than cost of 14 delivery. It's how I would characterise it from 15 watching them. 16 CHAIR OF THE INQUIRY: Yes. 17 MR LAKE: If you look at page 51 of your statement, 18 a different sort of leadership came up there. If we 19 could look at the last of the indented paragraphs, I'll 20 just read from the start: 21 "I think some in the administration also probably 22 felt gagged around the being held to ransom bit. I felt 23 in a difficult position because on the one hand TIE were 24 prosecuting all this, but there did not seem to be 25 anyone in the Council, whether that was the Chief 77 1 Executive or the administration's political leadership, 2 taking responsibility, ownership and leadership around 3 it." 4 What did you feel was lacking? 5 A. So from the point -- this was later on, and this was 6 under the Liberal Democrats/SNP administration, and by 7 that stage things were in a rather strange position 8 because the SNP had said they didn't support the trams, 9 but they were still part of the leadership of the 10 Council. 11 So there had been various break points and we were 12 post the point of the Princes Street issue, when the 13 street was closed and work didn't start and there was 14 a hiatus; and I had certainly felt at that period that 15 there was a role for the Council Leader, and the Council 16 Chief Executive to take some leadership and ownership 17 and attempt to resolve the disputes that were going on 18 and get work started, and to determine from the 19 contractors and from TIE how they could get them 20 together and get them back working together. 21 Q. You have already earlier in your evidence outlined the 22 rationale for having an arm's length company to have 23 skills and experience, but what you are saying, and you 24 say it in your statement -- you don't need to go to it, 25 I think, but at page 40, you consider that someone 78 1 should go to Germany and sort it out in Princes Street? 2 A. Yes, when nothing happened. 3 Q. Is that not taking control away from the company that 4 you had gone to all the expense of setting up? 5 A. We had set up a company to undertake specific tasks. If 6 it wasn't or didn't seem to be achieving those tasks, or 7 matters were moving in a way that didn't seem to be in 8 the interests of the city and the taxpayer, then as 9 shareholder, and as the body footing the bill, I would 10 still fully expect the Council to take an interest in 11 that and to take action on that. 12 Q. That would really require the Council to be involved in 13 the position of constantly monitoring what the company 14 was doing, to work out when it should step in and take 15 action? 16 A. Well, this -- in part there was supposed to be by 17 officers some relatively constant monitoring going on. 18 But in any case there was supposed to be regular points 19 where checks would be made on certainly financial spend 20 and project progress, and this was -- so arising from 21 the Princes Street issue, there was a very clear and 22 obvious situation that was obvious to anyone who walked 23 along Princes Street that no work was taking place. 24 So it was a matter not only about cost and 25 involvement. It was a matter of reputation for the 79 1 Council that it should be seen to be taking charge of 2 the situation. 3 Q. TIE were the party who were taking part in negotiation 4 of the contract and entering into it, and were 5 administering the contract with the contractor 6 consortium. Was it really going to help to have someone 7 else come from the political side of the Council, to 8 start trying to intervene in those contract discussions 9 at that stage? 10 A. What TIE were saying to us was that they were at an 11 impasse, and there was -- as I say, it was very public 12 and there was -- I had the feeling that the public of 13 Edinburgh saw that the Council had leadership and 14 ownership of this. And should therefore take action. 15 I also -- none of the issues that arose later and 16 became clear about the nature of the contract were 17 apparent at that stage. So it struck me that some of 18 this -- looking at it from the outside, some of this was 19 a relationship issue between some of the players and TIE 20 and some of the players in the consortium, and therefore 21 the way round that might be to get someone external to 22 that, but with an interest, and bearing in mind acting 23 on the interests of the taxpayer, to go in and see if 24 they could find a way to solve that dispute. 25 As it turned out, I suppose that's ultimately what 80 1 happened at Mar Hall, where the Council did take charge 2 of things, because progress wasn't taking place. 3 Q. Essentially at Mar Hall, TIE were moved to the side and 4 Sue Bruce took control of the TIE matter? 5 A. Yes. 6 Q. Turning to the question of provision of information to 7 you, I think you mention a couple of times in your 8 statement, you were told you mustn't discuss things or 9 you were restricted in disseminating information. Was 10 that information you had been given as Party Leader? 11 A. Yes. 12 Q. Did that not put you in a rather difficult position that 13 you were privy to information that you couldn't share 14 with other councillors who might be taking decisions on 15 matters relating to the tram? 16 A. Well, I felt that I had to keep my group colleagues 17 briefed and informed as much as I possibly could on 18 these matters, but I was put in a very difficult 19 position at times where TIE would accede to coming to 20 brief myself, and often Allan Jackson was present 21 because he was a TIE director, so already knew some of 22 the information. But they would ask that I did not pass 23 it on any further. 24 You would be given reassurances about some things, 25 and I was left in the position of at times having to 81 1 accept that information, and perhaps pass on reassurance 2 to colleagues that I didn't have the full information to 3 support and back up. 4 So yes, I was put in a very difficult position at 5 times. 6 Q. You said in your statement you adhered to the 7 requirements not to disseminate the information. You 8 indicated there you're not very happy. Was it beyond 9 being merely unhappy with the situation? 10 A. There were times when I -- so this varied through the 11 timeline of the project. As we continued, I think with 12 information that came out and situations that arose that 13 showed that some of the assurances we'd been given had 14 been false or partly false, then I became really quite 15 unhappy about it, but at an early stage, some of the 16 information seemed reasonable, and so I had to take it 17 on trust that people were giving me a full overview of 18 things; and I was conscious that, as some disputes 19 arose, that publicly airing those may cause a problem in 20 terms of any adjudications and so on. It was 21 commercially sensitive, and so in that sense I didn't 22 want to pass on too much -- if I was given indications 23 about costs or prices, I didn't want to pass on stuff 24 like that, that other group members may treat with less 25 confidentiality. 82 1 Q. You said you were aware of assurances that you'd been 2 given had been false. What were they? 3 A. Well, for instance, on utilities diversion, we were -- 4 it was reported quite regularly to us that a state of 5 completion of utilities diversion work, and ultimately, 6 and I can't remember the date, but my guess is it would 7 be about 2009-ish, maybe 2010, they started to report 8 that the utilities for the whole line were 95 per cent 9 complete. 10 Post Mar Hall it became clear that there were still 11 a great deal of utility conflicts between Haymarket and 12 York Place, and I've had it confirmed, or information 13 given to me more recently, saying there are something 14 like 1,200 utility conflicts still in the Leith Walk and 15 Newhaven section. 16 So that 95 per cent complete figure was obviously 17 inaccurate. 18 Q. When did you become aware of that? 19 A. With absolute clarity, once the Mar Hall situation had 20 taken place. 21 Q. What I was interested in was -- 22 A. But it seemed that the figures we were given on 23 utilities completion caused me some angst, and I did 24 continue to question TIE officials about them because we 25 were being given this figure of 95 per cent complete 83 1 that never seemed to move, and yet at the same time 2 there were still holes being dug in the streets, which 3 indicated that utilities work was ongoing. 4 Q. I can see that that might make you unhappy with the 5 information you had been given, its veracity. What I'm 6 really concerned about is the situation, were you being 7 given information that you were being told you weren't 8 allowed to pass on to your members, and that was causing 9 you unhappiness, that you knew your colleagues were 10 taking decisions without the information? 11 A. There was one particular occasion when that was -- that 12 I can point to that that was definitely the case, when 13 I had a briefing meeting with Richard Jeffrey and some 14 others from TIE and we discussed in detail where they 15 were with the adjudications of disputes. I asked 16 a considerable number of questions. I think it's been 17 suggested that TIE were saying they were winning the 18 adjudications. And when I probed that, I was told they 19 were winning but they weren't winning outright. 20 So, for instance, if there was a claim by the 21 contractor, and these figures are an illustration, they 22 are not an accurate figure, but the claim by the 23 contractor was GBP100,000, TIE disputed it and said 24 there should be no additional costs for the work done, 25 and the adjudication would come in at, say, GBP20,000 to 84 1 GBP30,000, then TIE would claim that as a win, because 2 they hadn't had to pay GBP100,000. 3 What my concern about that -- so I had two concerns 4 about that. One, I was told I could not discuss that 5 with anyone else, although -- 6 Q. Could not discuss what, sorry? 7 A. The detail of that, and the nature of how the 8 adjudication process had gone. 9 Q. Okay. You were told that by -- 10 A. I was told that by TIE officials. 11 Q. Including -- 12 A. Including the TIE Chief Executive. Because it may 13 prejudice future adjudications, was their reasoning. 14 Although I think I did discuss my concerns arising from 15 it with some other councillors, but those who would 16 already have an awareness, as I saw it. So I recall 17 speaking to Phil Wheeler about these issues at one 18 point, because he was the Convener of Transport and 19 a board member of TIE, in an effort to get, as I saw it, 20 the Lib Dems to take some more ownership and control, or 21 get the Chief Executive of the Council to take some more 22 ownership and control of the situation. 23 CHAIR OF THE INQUIRY: Did you think about speaking to the 24 Chief Executive? 25 A. I had spoken -- so the Chief Executive had become 85 1 strangely absent on tram issues by that stage in terms 2 of any briefings I had or discussions with him, and when 3 I asked for information that I could then raise, it 4 tended to come from TIE more directly, and they would be 5 supported by someone from city development in coming to 6 see me. 7 The issue was -- so I had partial information that 8 I couldn't then use to create a public issue, shall we 9 say. 10 MR LAKE: Do you consider that making that information -- 11 just sticking with the adjudication information -- 12 available to other councillors would have been of 13 assistance to those councillors in making decisions 14 regarding the trams? 15 A. I think it would have been of assistance to the whole 16 Council in allowing us to press -- we were in a stage 17 where we already had the contract and the adjudications 18 were a result of the way the contract was operating. So 19 I don't think we could have changed much about that by 20 that stage, but my impression was that, had we got to 21 a process like Mar Hall earlier, we could have saved 22 some of the additional costs that occurred, because 23 there was a lot of additional cost of the teams 24 involved, the legal teams and so on. 25 Q. Other than the adjudications, were there any other 86 1 categories of information you can recall that you were 2 told had to be kept confidential or that you were denied 3 access to because they were confidential? 4 A. I was denied access to counsel's opinion at one stage. 5 So TIE had sought counsel's opinion on their view of the 6 contract, and I was given a verbal briefing on that by 7 Richard Jeffrey, and the briefing was that they were 8 very secure in that the contract was fixed price, and 9 they could take forward into the adjudications and 10 prosecute on that, unless TIE had instructed changes 11 from the contractor and they claimed they were holding 12 those to a minimum. 13 I asked to see a copy of that opinion and I was 14 denied that. 15 Q. Can you think of any other particular categories of 16 information? 17 A. It's very difficult to pinpoint anything at this length 18 of time. I think I had -- my feeling is I had concerns 19 over a broad period of two or three years, and I raised 20 questions at different times. Sometimes with TIE 21 officers, sometimes even after Mar Hall with Council 22 officers, where I received information, but it was 23 either, as I saw it, incomplete or presented in a way 24 that didn't allow me to compare like with like or caused 25 me concern in another forms. 87 1 Q. Was that an awareness you had at the time or which has 2 emerged since? 3 A. Some of that I had an awareness at the time. 4 Q. Now, I think from the answers you have given already, 5 you would accept that there is need to keep some 6 information confidential for the interests of the 7 taxpayer? 8 A. Yes. 9 Q. I wonder then, do you have any ideas for how it -- you 10 can make a decision, what test to apply to determine 11 what has to be kept confidential and what doesn't and 12 who makes the decision? 13 A. Well, I have seen various methods of doing this in 14 public life. Some in the Council, some in other public 15 organisations, and the -- one of the things we do now in 16 the Council is we often have a data room where 17 commercially sensitive information is available to 18 councillors. You cannot take the information out of the 19 room but you can go and view it, and I think that is one 20 very good way of allowing the information to be shared 21 broadly, without releasing it to the public. 22 The other way of doing things is to set up a smaller 23 group who will look into something in detail and come 24 back and recommend a course of action. 25 Q. Were you aware that there was information leaked during 88 1 the course of the tram project and that TIE at least 2 considered it was detrimental to them? 3 A. Yes. Well, there seemed to be information leaked from 4 both sides. It was always difficult to determine the 5 veracity of that information. You asked how 6 decision-making should take place, so one of the 7 particular things I was concerned about when I asked 8 about the adjudications and, as I say, TIE were winning 9 partial victories, but there was additional cost, no one 10 seemed willing or able to indicate to me that -- how, if 11 the adjudications continued on a similar path, what 12 final figure of overspend we would be at, or how much it 13 was costing in delay, and therefore cost of time -- cost 14 in paying people while the delay took place around that 15 and where the project would ultimately get to. 16 I asked some of those questions because I was 17 conscious that when Princes Street work did start on 18 a cost plus basis, the contractor was paid an additional 19 amount, but when it was reported back to me, it didn't 20 seem a vastly additional amount, compared with what was 21 supposed to be the cost for the Infraco contract in 22 Princes Street. So it may have added 20 per cent or 23 something, when there were a lot of utilities conflicts 24 still in place. 25 So my concern at that point was how could we as 89 1 a Council or TIE, for that matter, who didn't seem to be 2 collating the information, get a view as to what point 3 it was more sensible to negotiate and come to 4 a conclusion around a different way of working, other 5 than to continue to rack up costs and legal fees and 6 other costs in the hope that you might get them back in 7 the long term. 8 Q. I want to turn now to ask a question about governance, 9 and I would like you to look at page 94 of your 10 statement, please. If we could look at the final 11 paragraph on the page. It's really the second half of 12 this paragraph I'm interested in, but I'll read the 13 whole of it for context: 14 "I think with hindsight some of the public 15 governance of the project within the Council was very 16 limited. Where there was a sub-committee, a tram 17 sub-committee or a transport committee, it did not meet 18 very often and it did not go into the detail." 19 I think you have already said that today in your 20 evidence as well: 21 "All of that was compressed into TIE or the Tram 22 Project Board. With hindsight I would want it to be 23 absolutely clear that the two things were different. 24 One was delivery and one was governance and oversight." 25 A. Yes. 90 1 Q. Now, what did you understand the respective roles of TIE 2 and the Tram Project Board to be in that regard? 3 A. Well, as I understood it from discussions with 4 colleagues, effectively the TIE Board and the Tram 5 Project Board became the one thing. They met 6 concurrently and they discussed the same issues. 7 I saw those -- if I think of project management 8 terms here -- as the operational delivery project board. 9 I saw a need for the Tram Sub-Committee or the Transport 10 Committee or some other forum within the Council, which 11 could be a governance board, which could then probe the 12 work that the project was undertaking and reporting 13 through its board, and hold that board to account for 14 delivery. 15 So one was a board concerned with delivery. The 16 other was about bringing governance and oversight to 17 that work. 18 Q. So you say essentially the oversight element had become 19 lost? 20 A. Yes. 21 Q. In terms of the approach to procurement now, you've 22 noted a number of places in your statement that there 23 were concerns within the Conservative Group as to the 24 cost of the project. What did you expect would be done 25 about that in the procurement strategy to try and avoid 91 1 it? 2 A. Well, I was -- so we are not conscious that we were at 3 any point given any options about what the procurement 4 strategy would be. But we were briefed, and I think my 5 recollection was that those decisions were taken early 6 under the Labour administration prior to 2007, and they 7 had agreed to go ahead with competitive dialogue with 8 a number of potential contracting consortia. 9 Our understanding from briefing from officers at the 10 time was that competitive dialogue would do two things. 11 It would get you to a final price that was your best 12 possible price by negotiating with a number of partners 13 who knew they were all negotiating and therefore keen to 14 have a price that you would accept and be the best. 15 But it would also get you benefits by encouraging 16 the various consortia to come forward with proposals 17 that might save cost, either on design or implementation 18 work that perhaps the traffic management around the 19 route or the order in which the route was built or 20 whatever, that they might be able to come up with 21 innovative solutions in that way. 22 So as a strategy, that was accepted by the Council. 23 Q. In terms of having control over the costs, you refer in 24 your statement to -- this would be relatively fixed. 25 A. Well -- 92 1 Q. I wonder what is meant by relatively fixed? 2 A. We were given an absolute assurance that this -- at the 3 point of contract signing, that this was a 95 per cent 4 fixed price contract. 5 So were there to be any risk elements, they were 6 small. They were within 5 per cent of the contract 7 price and they were on the side, assuming there were no 8 changes made. That was also with an assurance -- so the 9 point we got sign-off, it was 512 million for the 10 overall project, but each element of the project had its 11 own contingency built in within that as well. So there 12 was a great deal of assurance that by novating the rest 13 of the design work, that risk was passed to the 14 contractor; that we passed various other bits of risk to 15 the contractor in return for an increase in the 16 negotiated cost of GBP14 million over two tranches close 17 to contract sign-off, and that they were willing to take 18 on that risk. 19 That was presented very clearly to us in reports by 20 the Chief Executive. 21 Q. So that was -- when you refer to the GBP14 million, was 22 that the increase in price between the December price 23 and the final price in May when it was signed? 24 A. Yes. 25 Q. You understood that to be payment for -- 93 1 A. It was payment for -- it was presented to us directly as 2 a further transfer of risk, and also a willingness of 3 the contractor to mobilise appropriately and early to 4 keep us on timescale, because obviously there had been 5 an expectation that we gave the Chief Executive -- the 6 Council gave the Chief Executive the ability to sign off 7 the contract in December. There had been an expectation 8 that might be done in January, or at latest early 9 February, perhaps. This was obviously May, and that had 10 built in a delay, and part of the additional cost was 11 also to ensure early mobilisation to win back some of 12 that time. 13 Q. When you refer to the transfer of risk, did you -- was 14 it explained to you which risks had been transferred? 15 A. There was no specific explanation of that. These were 16 all very high level documents. 17 Q. I understand. I'd like to look at a different document 18 now. It's got reference CEC02083536. 19 We can see from the title page, it's said to be 20 a presentation by TIE, TEL and City of Edinburgh 21 Council, to the Council meeting that took place on 22 25 October 2007. 23 If we just go forward to the third page of this, we 24 can see under the heading "Background", under the 25 heading "June 2007", there's a reference to review of 94 1 the tram project by Audit Scotland and a couple of 2 quotations taken from that? 3 A. Yes. 4 Q. Did you attach any importance to the review that had 5 been carried out by Audit Scotland in June 2007? 6 A. Yes in the sense that it appeared to give the project 7 a clean bill of health, in terms of project management 8 and project strength. 9 Q. Looking to the foot of the page, we see the date, 10 September 2007, a reference to a further external audit 11 by the Office for Government Commerce, confirms project 12 status green. 13 Now, I think you have referred in your statement to 14 the fact that had you seen an earlier report which gave 15 it a red status, you would have had considerable 16 concerns? 17 A. I would have, yes. 18 Q. Here you are being told in a later report that it had 19 green status? 20 A. Yes. 21 Q. Did you place any reliance on that, and if so, what? 22 A. I don't recall. I'm not sure I recall this document. 23 I will have seen it at the time. 24 My recollection is twofold, that the things that 25 gave us some reassurance at that stage were that Audit 95 1 Scotland review and the fact that Transport Scotland 2 were still -- certainly until early 2007, were still 3 involved and were also still supportive of the project, 4 and were giving us indications, or it was reported to us 5 that they were happy with the project progress and the 6 project nature. 7 Q. We have finished with that document. 8 I want to jump forward then to the mediation which 9 took place at Mar Hall. And the Council voted there 10 should be a mediation at the end of 2010. 11 What input did the councillors have as to what would 12 be achieved or should be achieved at that mediation? 13 A. Certainly as an opposition councillor, I felt I had no 14 input. As I've said, you'll be speaking to 15 Jeremy Balfour later who was Leader by that stage, and 16 he may have more idea about what input others were 17 given. 18 When I was Group Leader, I was at times involved in 19 meetings of the group leaders where we were briefed and 20 our views were sought on some of these issues, or other 21 important issues to the Council. So Jeremy Balfour may 22 have more views on that at that stage. 23 Q. But you weren't involved in any consideration of what 24 might be achieved or what you would be looking for? 25 A. No; and indeed, I expressed discontent about that at the 96 1 time. I think I actually spoke in Council about it at 2 one stage. 3 Q. You note within your statement that -- for the record, 4 it's paragraph 55 -- that you had a concern that it's 5 not clear what the parameters of mediation were? 6 A. Yes. 7 Q. Do I take it that you would have welcomed the chance to 8 state what the objectives or the criteria were for 9 a settlement? 10 A. Yes. In my statement I have addressed other documents 11 that I was shown where I'd asked further questions about 12 the costs post mediation. Some of the way those costs 13 were derived were never satisfactorily explained to me. 14 My concern was that in places, despite the fact that 15 some work -- I know there had been delays, and there had 16 been issues with work ongoing. But despite the fact 17 that major elements of work had been undertaken, 18 including some of the larger infrastructure elements, so 19 bridges and so on, had already been undertaken, the cost 20 of the infrastructure bid, as far as I could tell, 21 seemed to be almost like restarting the project simply 22 to get to York Place rather than to build the whole 23 line. 24 Q. You note in your statement, for the record again, it's 25 page 84, that you had never been given what you term 97 1 a believable explanation of the huge increase in costs 2 post Mar Hall. When you say the costs post Mar Hall, is 3 that for the costs of the settlement that was achieved 4 at Mar Hall and subsequently built? 5 A. Yes. 6 Q. What were you looking for? What information were you 7 given about how the figures were arrived at? 8 A. There are some documents that I was given emails and so 9 on which I think -- 10 Q. I'm talking about emails you were given at the time when 11 the Council were being asked to vote on the outcome of 12 Mar Hall. What information were you given at that time 13 to satisfy yourself as to whether or not the deal was 14 one that should be approved? 15 A. Virtually nothing. It was a take it or leave it deal as 16 presented to us by Sue Bruce. 17 Q. Did you know -- I think there were two numbers, one for 18 completion to Haymarket and one for completion to 19 St Andrew Square, York Place? 20 A. Yes. 21 Q. Were you given an explanation of how those numbers were 22 made up? 23 A. No. 24 Q. Nonetheless, a vote was taken ultimately that it would 25 be completed to St Andrew Square and York Place? 98 1 A. Yes. 2 Q. On what basis were the Council able to take a decision 3 that that should be done, when they didn't know how the 4 cost of it was made up? 5 A. So that final decision at the second emergency meeting 6 was a very political decision, and I would characterise 7 it as being partly about the Council finding itself 8 a way out of a difficulty, and partly about pressure on 9 the Council from Government regarding the grant funding 10 that was available; because my understanding at that 11 stage, the way it was presented to us at least in 12 private, was that should we -- that Ministers were 13 unhappy with the vote that had taken place with the 14 decision to terminate at Haymarket, wished to see 15 a completion further through the city centre, and were 16 threatening to withdraw funding from the Council if we 17 didn't change that decision and build to 18 St Andrew Square/York Place. 19 So that would have been catastrophic for the 20 Council's finances. 21 MR LAKE: Thank you very much. I've got no further 22 questions. 23 Questions by CHAIR OF THE INQUIRY 24 CHAIR OF THE INQUIRY: Could I ask two things. I think you 25 mentioned one point that you had recently discovered 99 1 that there were of the order of 1,200 conflicts in 2 utilities in Leith Walk. When did you discover that? 3 A. That information has come to us as we've looked at the 4 Business Case information for what the Council is 5 calling the extension to Newhaven, what I would like to 6 call the completion to Newhaven. 7 CHAIR OF THE INQUIRY: So does that appear in the Business 8 Case that you've been given? 9 A. Yes. It's not just Leith Walk. It's the full section 10 to Newhaven from Picardy Place. 11 CHAIR OF THE INQUIRY: So if there had been, or if there was 12 any public perception that the extension or completion, 13 whichever word we use, was relatively straightforward in 14 that the utility work had been done and it was a case of 15 laying the track, that would be a false impression? 16 A. That would, on the information we've now been given as 17 councillors, be a false impression. 18 CHAIR OF THE INQUIRY: Another thing I want to ask you about 19 is that you say there was a delegation to the 20 Chief Executive to authorise TIE to sign the contract. 21 What, if anything, did you expect the 22 Chief Executive to do before being satisfied that the 23 contract met the objectives of the Council? 24 A. I expected him to work with his other senior officers 25 who were involved in this, so that would be the Director 100 1 of City Development, the Director of Finance, and the 2 Council Solicitor, to exercise due diligence to ensure 3 that TIE were signing something that was appropriate and 4 would meet the aims that the Council had asked the 5 company to achieve, and also I would have -- to some 6 extent I would have expected some of that work to have 7 been done prior to the delegation being given, because 8 he was reporting to us on risk and 95 per cent certainty 9 of price. So I would have expected that he would be 10 ensuring that what was being signed met with what he had 11 previously been presented and what he was presenting to 12 us. 13 CHAIR OF THE INQUIRY: So that's independent of any work 14 that TIE was doing, you would expect him to do work on 15 behalf of the Council; is that what you're saying? 16 A. That is correct. 17 CHAIR OF THE INQUIRY: There is a third point. A minor 18 point. I wonder if I could look at your statement, 19 please, at page 93. The top paragraph. That says: 20 "We have raised an action, but I fear that by the 21 time Lord Hardie finishes, there will be no corporate 22 memory to take that forward. It will be too late. That 23 is potentially financial but is also reputation, as the 24 Council seems unable or unwilling to fight for its 25 constituents." 101 1 Can I just understand what it is that you 2 understand. Are you saying that the action or actions 3 that have been raised by the Council cannot proceed? 4 A. They have been sisted, I believe, and my concern would 5 be that given what I've been told about availability of 6 information and the perhaps 6 million documents that 7 your Inquiry has and the ability to search that 8 information, and then in relation to that information 9 to -- so this specifically, I suppose, is about 10 an action against TIE's solicitors or those who were 11 advising. 12 I already fear that it is too late to gather the 13 information and make that stick, because most of the 14 people who were Council officers at the time and had the 15 knowledge and ability to take that forward have now left 16 the Council. 17 CHAIR OF THE INQUIRY: Are you aware that before the 18 preliminary hearing, some time before the preliminary 19 hearing, three actions were raised by the Council in 20 this regard, and they were sisted long before the 21 hearing? It may be that if any progress has been made 22 with these actions, it's been as a result of my comments 23 at the preliminary hearing; and if they're still sisted, 24 it's perhaps due to a lack of action by the Council in 25 progressing them. 102 1 A. Yes, I would say so. 2 CHAIR OF THE INQUIRY: Do you understand that there must 3 have been information before the Council to enable it to 4 raise this action, assuming it's behaving responsibly? 5 A. Yes. And I would have liked to have seen a more 6 proactive approach on some of that, because I felt that 7 the Council should be seen to be seeking redress for the 8 taxpayer where something has gone wrong in the project, 9 were there a liability elsewhere. 10 CHAIR OF THE INQUIRY: Thank you very much. I take it no 11 one has any questions? Thank you very much, Mr Whyte. 12 You're free to go. As I say, you're still liable to us 13 under your citation. You may be recalled. I hope that 14 won't be necessary. If it does prove necessary, 15 Ms Fraser will get in touch with you. 16 MR LAKE: My Lord, as Councillor Whyte indicated, the next 17 witness and the final witness for this week to give 18 evidence is Jeremy Balfour who is now a member of the 19 Scottish Parliament. 20 Now, unfortunately he's not available to give 21 evidence this morning, but there is an arrangement that 22 he will be here by about 1.30 or 1.45. In this 23 circumstance, I would suggest that we rise early and 24 perhaps resume slightly earlier than we normally would. 25 CHAIR OF THE INQUIRY: I think what we'll do is we'll rise 103 1 for lunch and resume again -- we will aim to resume 2 again at 1.40 and see if he's here, as long as people 3 understand that if he's not here by then, we may have to 4 have a short delay until he turns up. 5 (12.19 pm) 6 (The short adjournment) 1 INDEX 2 PAGE 3 MR DONALD ANDERSON (continued) .......................1 4 5 Examination by MR LAKE ........................1 6 7 Examination by MR FAIRLEY. ...................18 8 9 MR IAIN WHYTE (sworn) ...............................44 10 11 Examination by MR LAKE .......................44 12 13 Questions by CHAIR OF THE INQUIRY ............99 14 15 MR JEREMY BALFOUR (sworn) ..........................104 16 17 Examination by MR LAKE ......................104 18 19 Questions by CHAIR OF THE INQUIRY ...........146 20 21 22 23 24 25 149